Paper Shortage: Availability, Pricing Levels, Delivery Times Remain Concerns for the Printing Industry

When the COVID-19 pandemic first swept through the world in spring of 2020, no one could have anticipated that it would linger for this long. Or that it would spawn a host of challenges commercial printers continue to struggle with daily. Chief among those challenges? The ongoing struggles to obtain enough paper to actually run jobs.

MWI Direct President Dean Hart

Dean Hart, president of MWI Direct in Lincoln, Neb., notes that in his 30 years of buying paper as a printer, he has seen some tight markets — but never anything like this. Paper, he says, is “historically a stable product, it doesn’t change rapidly in pricing. But this year has seen significant increases just as a function of the demand; it spiked so high, and has continued to be more and more difficult as time has gone on.” In real terms, Hart notes, that when he’s lucky enough to secure a shipment, delivery times are up to 90 to 120 days, and the prices have gone up 30-40% just this year alone.

The reason for this major disruption can’t be blamed solely on a single cause. Sarah Walters, VP, Paper and Packaging, for Catalyst Paper, part of the Paper Excellence family, points out that logistics have played a major role, and continue to cause challenges for mills. “The global supply chain has been severely impacted across the board. For example, containers around the world were stranded during the height of the pandemic,” she says. “This disrupted the flow of logistics and continues to impact freight rates.”

Global Supply Chain Disruption

Jeff Hederick, chief commercial officer at Twin Rivers Paper Co., reports that just obtaining the raw materials needed to make paper grades has been a difficulty his company has continued to try to find ways to overcome.

“The COVID-19 pandemic impacted our global and domestic supply chains, prompting us to engage in more advanced planning and further enhance our relationships with key raw material suppliers,” according to Hederick. “We’ve become more strategic versus tactical in sourcing: developing new resources for substitute raw materials, fast-tracking back up supply resources to alleviate shortages, and broadening and pre-qualifying our vendor partner base to eliminate potential supply chain gaps.”

Experiencing similar challenges, Melissa Stevens, chief revenue officer for Mohawk Paper, notes, “we buy pulp on the open market, which has been heavily impacted by the availability of raw materials such as pulp, chemicals, foil, containers, and pallets — the whole supply chain has been constricted.” She says that everything from the skyrocketing prices of pulp, to the shortages of timber needed for the pallets to ship the paper out, to difficulties getting shipping containers picked up or dropped off, have all contributed to difficulties that have trickled down to the commercial printers who rely on those papers to produce the end products for customers.

Stevens contends the pandemic alone hasn’t been the only factor disrupting supplies in 2020 and 2021. Major weather events, she says, had a huge impact as well, with everything from fires in the West, to the cold snap in Dallas last winter impacting the production of raw materials needed to produce not just papers, but adhesives, foils, vinyls, and many other materials print shops use on a daily basis — further disrupting an already delicate and complex balance.

And if all of that wasn’t enough, printers aren’t the only ones looking to procure the same raw materials, which is further driving up costs and reducing availability. Mark Pitts, AF&PA executive director, Printing-Writing and Pulp & Tissue, notes that everyone is well aware of the spike in demand for bathroom tissue products as the pandemic unfolded last year.

“In general, there was significant demand for personal hygiene products, food packaging, corrugated packaging, and paper-based medical supplies,” he says. Many of the mills that produce printing papers also produce many of these products and, as demand has increased, they are being forced to balance the load between not only different grades of papers, but for different products as well.

Demand is something that Maria Ferrante, senior director of marketing and communications, The Association for Packaging and Processing Technologies (PMMI), has also seen as playing a major role in the difficulties printers are having right now. “Demand for pulp and paper products — such as personal hygiene products (including masks), food packaging products, corrugated packaging, and other paper-based materials — skyrocketed.”

The response to that demand for many of the mills, Ferrante continues, was a complete shift from traditional printing papers to materials such as paper board or corrugated board. And the consumer demand driving that shift isn’t going to ease, even into 2022 and beyond, which in turn means the pressure on the paper grades used in commercial printing operations will continue to be a factor for many months to come.

Allotments and Relationships

One reason for the volatility in the supply chain has resulted from the unusual patterns of demand since early 2020. Last year, demand dropped off significantly, according to MWI Direct’s Hart. His company specializes in direct mail, with a focus in verticals such as nonprofits, financial services, and retail — all of which saw dramatic decreases, if not outright stoppage, of their campaigns last year as COVID-19 disrupted businesses.

However, going into 2021, many of them, he says, have come back strong, looking to regain the market share they lost last year, and many are looking to spend more on print-related campaigns than they did pre-pandemic. That, in turn, has led to an extreme swing from almost no print demand at all to a demand that exceeds 2019 levels. It’s a shift the paper mills just can’t make quickly.

Hart notes that one of the ways mills are handling this spike in demand is to return to the allotment system, where mills will only sell a set amount to an individual printer. That amount can change based on how much paper the shop bought in previous years, as well as how good of a relationship the printer has with the mills in question. “Most have tried their best, “ he says, “but it’s been tough for everyone.”

Walters, of Catalyst Paper, says relationships are critical for printers looking to secure paper inventory right now — and that requirement is not likely to change any time soon. “Invest in partnerships with the mills you buy from, and source for long-term supply. Try adjusting your ordering plan to current lead times,” she advises. It requires a little more effort on the front end, but it will make for a much smoother process overall.

“Our advice to printers is to embrace and develop relationships with domestic suppliers,” Hederick says. “We have seen the most success when there is continuous communication and collaboration with our customers, helping us better forecast and serve their needs, even when the market gets tight.”

Paper Shortage: No End in Sight

So how long will these conditions persist? Across the board, the experts are fairly confident this is going to be the “new normal” at least through the end of 2021, and likely into the first quarter, if not the first half, of 2022.

“Demand will continue to outpace supply, and it is no small matter for mills to quickly ramp up production,” Hart says. “With all the tons taken out of the market over the past several years, this will continue well into 2022.”

Unfortunately, he adds, the rising prices and longer lead times will likely lead to buyers being forced to scale back print campaigns, either being priced out of the market, or simply unable to wait until paper inventory can be secured. “Our customers’ budgets and ROI will dictate if they eliminate or reduce order volumes, and that is not what printers want to see happen,” Hart notes.

Because of that allocation system that relies heavily on selling paper based on what was purchased in the past, those printers looking to enter new markets, or expand into new types of printing — such as adding production inkjet cutsheet equipment when they previously only ran web offset rolls — will find it nearly impossible, in some cases, to get any paper inventory at all. According to Hart, this could curb business expansions and growth opportunities for at least the next year, assuming things begin to stabilize some time in the first half of 2022.

“We anticipate the tight market to continue, and there is a risk of further conversions or reductions of supply in the overall market,” Walters says. “Right now, building partnerships and making long-term commitments are extremely important. Catalyst Paper is focused on aligning our assets with strategic customers who fit our product mix.”

That alignment is something Mohawk is also seeing, with Stevens noting the company has used the pandemic to re-evaluate its entire line, and to refocus on the products that make the most sense, both as best sellers, and for the market in general. She explains that the refocusing has happened with printer clients, too, with a push to identify customers willing to set a volume goal. “It’s identifying what brands they are looking to support, so if we’re building inventory, they’re committing to taking it and we’re producing the right papers for their floor. That communication is so critical.”

But it’s not all bad news — in fact, Stevens is actually very optimistic about the future, current supply challenges notwithstanding. “We’re seeing all of these inventory challenges because business came back faster than all of us were able to react to. At the same time, it’s exciting and very hopeful. We just have to work through this together.”

The AF&PA also remains optimistic about the future.
“In the graphic papers segment, we are seeing a recovery from 2020,” Pitts says. “The U.S. Postal Service published its fiscal third-quarter results, with First-Class mail increasing, and Marketing mail volume 39% ahead of the same period last year.

“In addition, printed book sales in 2020 increased 8.2% over 2019, and reached the highest level since 2010. Print offers a unique value proposition and experience that remains strong. And print producers are continuing to find new ways for printed products to remain in the media mix.”

However, it’s important to remember that things aren’t going to go back to the way they were pre-pandemic. Improvements to the current status quo are almost guaranteed as we move into the next year, but that isn’t the same thing as a return to pre-pandemic
business practices.

“The post-pandemic world will be much different with changes in the market and consumption patterns,” Ferrante notes. “Procurement should reassess the organizational priorities and business plans, and carry out risk management to be better prepared to tackle the situation in the future.”

Bottom line: the current challenges in procuring paper aren’t going to disappear in the next few months. And while there is hope for 2022, there is still too much uncertainty to predict a full return to capacity levels to meet demand any time soon.

6 Paper Buying Tips for a Tight Market

For those printers struggling to just find enough paper to meet deadlines and fulfill customer jobs, here are a few ideas the experts offered beyond just cultivating closer relationships with paper mills and merchants:

• The more commoditized the grade, the more allocations that are in place, so look to higher-value, premium stocks for better availability.
• Changing manufacturers now is not a good idea. Stick with your current supplier, who understands your needs and has planned for them. And communicate your future needs as far in advance as possible since lead times will remain long into 2022.
• Similarly, trying to stock up by placing a lot of orders will hurt everyone in the end, as it creates an artificially high demand. Suppliers use historic demand to make decisions about future products, so sudden large orders will throw off these calculations.
• Don’t worry about the size. While it might cost a bit more to buy an oversized roll and have it cut down by a third-party converter, having paper to run through your presses is preferable to no paper at all.
• Cutsheet papers are slightly easier to get right now over rolls because many of these papers come from distributors that don’t have the same allotment requirements as the mills themselves. While demand is rising — and that could change — consider investing in cutsheet inkjet equipment as a supplement to web or roll-to-roll devices to give your print shop more flexibility.
• Consider cultivating relationships with peers in your market. Some shops stocked up on inventory before the shortages really got started, and might have excess paper they are willing to sell or trade. Creating a group of like-minded printers to share resources with could mean the difference between being able to finish a job as promised, or having to turn work away.